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For homeowners who are struggling to save their homes from foreclosure, loan modification, refinance, and selling the property are not always viable options. An alternative means of fighting foreclosures is to challenge the legality of the loan by raising certain foreclosure defenses.

Real Estate Settlement Procedures Act (RESPA) Violations

The purpose of RESPA is to ensure that the costs of settlement services are reasonable and to eliminate kickbacks. To that end, the Real Estate Settlement Procedures Act requires lenders to disclose to borrowers the cost of settlement services. Additionally, RESPA requires lenders to establish guidelines for the management of escrow accounts. Challenges to foreclosures based on RESPA typically allege one or more of the following violations:

Failure to provide the borrower with a Good Faith Estimate;

Failure to provide the borrower with a Mortgage Servicing Disclosure Statement;

Failure to provide the borrower with the Initial Escrow Account Itemization;

Failure to provide the borrower with a HUD-1 Settlement Statement;

Failure to provide the borrower with an annual escrow account reconciliation; and

Failure to provide the borrower with a Notice of Transfer of Servicing.

Truth in Lending Act (TILA) Violations

The Truth in Lending Act requires lenders to disclose to borrowers the true cost of a loan by providing them with a Truth in Lending Disclosure that reveals:

The loan amount;

The annual percentage rate;

The term of the loan;

The amount of interest the borrower will pay over the life of the loan; and

The total principal and interest the borrower will pay over the life of the loan.

Servicing Errors

Many homeowners have successfully challenged foreclosures by proving that the lender made one or more servicing errors. The most common servicing errors include:

Misapplication of payments;

Miscalculation of late charges;

Mismanagement of escrow accounts; and

Miscalculation of the amount necessary to reinstate the loan.

Other Grounds for Challenging a Foreclosure

There are a number of other grounds upon which a foreclosure challenge may be based. One such ground is violation of consumer protection laws. Violations of the following consumer protection laws may be a valid basis for challenging a foreclosure:

Home Ownership Equity Protection Act (HOEPA);

Fair Debt Collection Practices Act (FDCPA);

Equal Credit Opportunity Act (ECOA); and

Fair Credit Reporting Act (FCRA).

Other grounds for challenging a foreclosure include:

Unconscionability;

Violation of state usury laws;

Breach of contract;

Fraud;

Predatory lending; and

Violations of state foreclosure laws.

Getting Legal Help

Challenging a foreclosure is a complex undertaking which requires a high level of expertise. Therefore, it’s best to hire a qualified attorney who will review your case to identify any violations which may have occurred in the loan application, approval, or servicing process and who will represent you in defending the lender’s foreclosure action.